Supreme Holdings & Hospitality Ltd Management Discussions.
(a) Industry Structure:
Due to global economy slow down, the pace of growth of Indian Economy was decelerated during the financial year 2018-19. The GDP growth stood at 6.8% in the FY 2018-19, lower then 7.2% in FY 2017-18. The GDP growth was slowest since 201415. Real Estate is a key sector of Indian Economy. It is the Second largest sector in India in terms of providing employment. In line with slowdown growth in economy, the pace of growth of Real estate Sector was also slowdown during the financial year 2018-19. The Government is keen to develop this sector and has adopted various reform measures to boost this sector. The steady reforms, rapid urbanisation, rising household income will accelerate the pace of growth of this Sector.
(b) Companys Performance:
The revenue from real estate activity is recognised in accordance with the "Guidance Note on Accounting for Real Estate Transactions (for entities to whom Ind AS is applicable)" issued by the Institute of Chartered Accountants of India (ICAI), and accordingly the income from operations during the year 2018-19 has been reported at Rs. 5,459.86 Lacs. The other Income during the year 2018-19 was at Rs. 70.90 Lacs. The total Income for the year 2018-19 was at Rs. 5530.76 Lacs as compared to Rs. 4868.33 Lacs in the previous year.
During the year under review, the cost of sales and other operational expenses were at Rs.4669.65 Lacs as against Rs. 4001.91 Lacs in the previous year. The employees cost during the years 2018-19 was at Rs. 137.90 Lacs as compared to Rs. 78.93 Lacs in the previous year and the Administrative & Other Expenses were at Rs.341.78 lacs as compared to Rs.489.52 lacs in the previous year.
The Profit for the year 2018-19 before depreciation and taxation was at Rs. 379.72 Lacs as against Rs. 297.86 Lacs in the previous year. The Depreciation was at Rs. 12.75 Lacs as against Rs. 4.38 Lacs in the previous year. After providing for taxation, including deferred tax, the Company has reported Profit of Rs. 309.41 Lacs during the year 2018-19 as against Rs. 150.44 Lacs in the previous year. After Considering the other comprehensive income (Net of Tax) for the year under review at Rs. (4.0 )lacs as against NIL in the previous year, the total comprehensive income for the year 2018-19 was at Rs. 305.41 lacs as against Rs.150.44 lacs in the previous year.
(c) Segment -wise Performance:
As Company had only one reportable segment during the year, disclosure under Ind-AS 108 on segment reporting is not applicable to the Company .
(d) Outlook for the Company:
The residential projects of the Company is progressing as per schedule. The Company is committed and has focus on quality and timely delivery of the project and is also building brand image for the Company. . Company strongly believes that the demand for the real estate in the country will remain strong in the medium to long term The growth and long term prospects of the Company are encouraging.
(e) Opportunities, Threats, Risk and Concerns:
The Government has clearly recognised the importance of real estate sector and has continuously adopted various reforms for this sector. The Budget announcement also indicates the Government stands. Steps taken to increase flexibility on deployment of capital gains from property, increasing the tax exemption period for unsold inventory and exemption from notional rent tax on second property, extension in time limit for availing tax deduction by one year for affordable housing, change in GST rates and many other measures are focused towards improving real estate demands. The Real Estate (Regulation and Development) Act, 2016, has improved confidence of consumer and brought the required transparency and order to the real estate Sector and there are lots of opportunities in this sector. The Affordable housing is a key opportunity in this Sector and it will remain a key driver for the growth of this Sector. The measure housing shortfall is in the economically weak and low income segment. The Purchasers are likely to benefit from the availability of Low cost home loan and lower GST rate and while the developers will enjoy the advantage of favourable tax rate.
The Real estate market is very much affected by the changes in government scheme, changes in supply and demand for projects, availability of finance and liquidity. The unanticipated delays in project approvals, increase cost of manpower, rising cost of constructions, availability of trained labour force, availability of finance, multifaceted tax levies on various transactions are the major challenges in the construction Industry. There are substantial procedural delays with regards to construction approvals. Retrospective policy changes and regulatory bottlenecks may impact profitability and affect attractiveness of the sector . Sectoral Caps set by RBI for the total maximum exposure of banks to real estate including individual housing loans and lending to developers for construction finance which is very low and also the reluctance of NBFCs to fund the real estate developer is curtailing the overall growth of Industry. Absence of long term funding from Banks is forcing developers to look at alternative sources of funds most of which do not offer affordable interest rates. The Sector in general are sensitive to fluctuations in the economy, government policies and is very sensitive to the global security environment. In the course of its business the Company is exposed to stiff competition from other developers in the market
(f) Internal Control Systems and their Adequacy:
The Company has proper and adequate systems of internal control. The internal control systems of the company are designed to ensure the financial and other records are reliable for preparing the financial statements and other data and for accountability of assets.
The company has an Audit Committee of the Board of Directors, which meets regularly to review the adequacy of internal controls.
(g) Human Resources:
Your Company believes that its employees are its core strength and accordingly development of people and providing a best-in-class work environment is a key priority for the Organisation to drive business objectives and goals. HR policies are in place which enables building a stronger performance culture and at the same time developing current and future leaders. The Company enjoys cordial and harmonious relationship with its employees. The Company has 19 numbers of permanent employees as on 31st March, 2019.
(h) Comparative analysis of Financial ratios and significant Changes therein as on 31st March, 2019:
|Particulars of ratios||2018-19||2017-18||Whether ratios change more than 25% as compared to previous financial year (2017-18)||Detailed explanation for changes therein|
|Debtor Turnover||8.37%||11.97%||Yes||Due to increase in debtors of the Company Debtor Turnover increases by more than 25% during reporting period|
|Interest coverage Ratio||216.81 %||NA||NA||NA|
|Debt-Equity Ratio||24.57%||37.55%||Yes||Due to the increase in debt of the Company, Debt -Equity ratio increases by more than 25% during reporting period|
|Operating Profit Margin (%)||14.5%||16.2%||No||NA|
|Net Profit Margin (%)||4.70%||3.91%||No||NA|
(i) Disclosure of changes in Return on Net Worth and explanation thereof:
The Return on Net worth of the Company is 3.96 % for financial year 2018-19 as compared to 2.00% for financial year 2017-18.